Friday, August 24, 2012Last Update: 3:46 PM PT

Amtrak Has No Claim to Competitor's Millions

(CN) - A company that drew three Amtrak employees away from the national rail operator does not have to turn over $2.2 million in profits, a federal judge ruled. In 2007, Amtrak lost a contract with the Southern Florida Regional Transportation Authority after a competitor, Veolia Transportation Services, brought three Amtrak employees into its management fold. A jury found that Veolia wrongly encouraged the three ex-Amtrak employees to breach their fiduciary duties, but that Veolia's conduct did not cause Amtrak to lose the contract. After the verdict, Amtrak claimed the jury's decision showed Veolia would not have earned the contract without its wrongful conduct, and therefore must hand over the profits earned on the contract thus far - more than $2.2 million - as well as its future profits. U.S. District Judge Barbara Rothstein disagreed, finding that "the jury's finding on causation closes the door to disgorgement." "When, as here, the factfinder determines that the defendant's profits would never have been enjoyed by the plaintiff, the rule does not compel disgorgement," she wrote. In addition, "Amtrak was not a fee-paying client of Veolia," she added. "No shattered fiduciary relationship between Veolia and Amtrak requires the court's protection. Therefore, any compelling reasons for sanctioning disloyal employees and thereby 'enforce[ing] by prophylaxis the special duties of the fiduciary' and 'protecting the reliance of the beneficiary on the fiduciary's disinterested conduct' do not militate in favor of a remedy here." "An award of Veolia's profits to Amtrak in no way impacts the three disloyal employees; their incentives to breach in the future would remain exactly the same if Amtrak were to prevail in this action. Indeed, Amtrak's expressed concern for such deterrence rings hollow in light of the fact it rehired one of these disloyal employees and promoted him to higher paying position after he breached his duty to Amtrak," Rothstein stated. (Emphasis in original.) "Although the court declines to dissect Veolia's books, it finds persuasive Veolia's argument that its profits are the result of a wide range of factors that outweigh the contributions of the three disloyal employees."